Of course, if the taxpayer uses the 100 percent bonus depreciation on certain property they are not allowed to take any more depreciation expense for that item. Consequently, they won’t be able to take depreciation expense for that property in future years even if it still is in use.

Keep in mind for a building it needs to be built and available for use by the end of the year. Purchasing the building materials and having them on the farm does not qualify. Similarly with a tractor, if a farmer paid for the machine and it is sitting on the dealer’s lot it would not qualify.

Property that is required to be depreciated under the alternate depreciation system (ADS), including farmers with fruit trees or vineyards who elected out of the uniform capitalization rules, are not eligible for bonus depreciation.  

There is no phase out based on qualified property placed into service like there is for direct expensing (section 179 first year expensing). There is also no business income limitation. 

Automobiles used 100 percent for business purposes can take an extra $8,000 of additional or bonus depreciation and do not take the 50 percent of purchased cost. 

As stated before, bonus depreciation is required to be taken unless a taxpayer elects out of it. Election out of it can be taken for all property or property by class (3, 5, 7, 10, 15, or 20 year property) but everything within a class must be treated the same.

Bonus depreciation is taken on the carryover basis from traded-in property, so the total cost can be taken. If a farmer traded in an old tractor for a new tractor, the total cost of the new tractor would qualify for bonus depreciation, not just the amount paid to boot.

As always, it is a good idea to discuss this with the appropriate tax advisor.